This blog will highlight key EPM market trends, recent events and other news of interest to our field, customers and partners.

Wednesday Feb 25, 2015

There are so many wonderful business tools and methodologies out there that can help us monitor, analyze, set strategy and improve efficiency, etc., but can they all work together? Where do they connect? In this post I will focus on how EPM and Six Sigma intersect.

Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process – from manufacturing to transactional and from product to service. The principals of Six Sigma were originally were created by William Deming in his rebuilding of Japanese manufacturing industry post-WWII by applying statistical methods to measure, test, and improve design, quality and service. By the 1980s, Six Sigma management techniques had been adopted more broadly for business process improvement and U.S. manufacturers such as Motorola, GE, Honeywell, and Dow competing in the global market. By the 1990s, Six Sigma transcended manufacturing as Ritz Carlton Hotels applied total quality management and process improvement techniques to delivering five-star luxury service for their guests and were recognized twice with the Malcolm Baldrige National Quality Award by the U.S. Department of Commerce.

The Six Sigma method, when employed properly, aligns your organization and processes to achieve efficiency and a standard quality (whatever the standard should be).

Enterprise Performance Management is focused on

* Setting strategy for the company, including - Which products/services should be the focus in order to be competitive - Who are the desirable customers - Which markets to play in - What are the short and longer term goals * Setting budgets, simulating forecasts* Monitoring strategy execution* Adjusting the strategy based on outcomes* Reporting on the financial outcomes* Repeat

To be very successful, the two methods should be employed together – EPM setting the desired strategy, Six Sigma providing the optimal processes and products/services to achieve the strategy; Six Sigma reporting on the outputs of the company and EPM reporting on strategic and financial outcomes.

Six Sigma’s job is primarily focused on lean operations, eliminating waste and inefficiencies from monitoring feedback to knowing what’s working and what’s not, and when to ask what-if, making adjustments based on that feedback for continuous improvement, etc. – where Enterprise Performance Management has both an internal and external view. It is simply not possible to set your near or long term strategy successfully without having an understanding of the external markets, external customer sentiment, competitors’ movements and of course R&D on new products and services.

Without getting too philosophical, EPM typically functions assuming products and services are being made well and focuses on setting strategy and executing the strategy. Six Sigma focuses on making the products and services well and assumes that they are the right products and services to be made and delivered. In my opinion, they need to work hand-in-hand to successfully achieve your strategy.

Tuesday Feb 03, 2015

2014 was a busy year for Oracle EPM, with new product launches, research studies, as well as customer events like Oracle OpenWorld. Let’s look back at the top highlights.

1. Oracle released Planning and Budgeting Cloud Service (PBCS). No longer are organizations constrained by their hardware and IT resources – organizations embraced the idea of SaaS for company-wide planning and budgeting in 2014. With Oracle Planning and Budgeting Cloud Service, companies can access world-class planning with the simplicity of the cloud. Find out more about PBCS in this ebook or get details here.

2. Oracle released its 2014 EPM Trends report. Oracle surveyed hundreds of IT and finance decision makers to learn about their Enterprise Performance Management plans for 2014—both within the Oracle customer base and the industry at large. Respondents provided specific feedback on their current use and plans for financial planning, budgeting, forecasting, costing, financial close, use of technology and the cloud, sustainability reporting and more. From this data set we compiled the following trends link.

3. Oracle was again recognized as a Market Leader in the 2014 Gartner Magic Quadrant for Corporate Performance Management Suites . For the eighth consecutive year, Gartner recognized Oracle as a Market Leader in its 2014 Magic Quadrant for Corporate Performance Management Suites. In this year’s report, among the market leaders, Oracle is positioned with the highest ability to execute and the farthest in completeness of vision. To view the report, clickhere.

4. Oracle published The OVUM EPM ROI Study. This comprehensive study of large, experienced EPM customers provided very tangible best practices and results. For example, Oracle Enterprise Performance Management delivers >200% return on investment. Oracle Enterprise Performance Management delivers +NPV by the end of Year 1. For more details and results, click here

5. Oracle published the CFO Research Report: Modern Finance in the Digital Age.
In the new era of cloud, social, mobile, and big data technologies, the CFO is uniquely positioned to create modern, technology-enabled business models and stronger C-suite collaboration. Learn more about the best practices CFOs must apply to create an effective modern finance organization. Click here.

6. Oracle announced B/E Aerospace as the 2014 EPM Innovation Award Winner. In just nine months, B/E Aerospace completed a full-scale implementation that was delivered on time and under budget. As a result, they were able to reduce by 80 percent the amount of time it takes to mine data from more than 30 sources, plus, they can acquire new companies and integrate their financials in three to four weeks instead of six months—dramatically speeding assimilation and reinforcing their acquisition strategy. All strategic and financial goals were met on time and, in some cases, under budget. To learn more about our winner, watch this video.7. EPM goes Mobile! Today’s businesses need to identify business performance insights and optimize decisions anywhere, anytime. The mobile capabilities in Oracle’s EPM System deliver these insights and unlock productivity gains and business value across the enterprise. View EPM Mobile capabilities in this video or click here fordetails.

8. Oracle announced its new Operational Transfer Pricing solution. Operational Transfer Pricing is a profit allocation methodology required of multinational corporations. Specifically, the ultimate goal of transfer pricing is to ensure that intercompany allocations result in true economic profitability by legal entity. In today’s global economy, profitability can be significantly impacted by goods and services exchanged between the related divisions within a multinational company. For more information, listen to this podcast, or click here for more details.

9. Oracle OpenWorld video series published on YouTube. There are so many excellent presenters at Oracle OpenWorld each year, but it is impossible for some to attend the event, and impossible for those that do attend to get to every session. Many of our Business Analytics speakers agreed to share some of the highlights of their presentations so that everyone would have a chance to learn. To view videos, click here.

10.Collaborate 2014 video series published on YouTube.
Collaborate is a North American conference comprised of the three major Oracle User groups – IOUG, OAUG and Quest. For those that missed a session or the conference, several speakers shared their Business Analytics presentation stories with us on video, and they were published on our Business Analytics YouTube channel. To view videos, click here.

As we move into 2015, there are many exciting developments in store, and you can expect to see us talking more about cloud and new digital technologies in EPM.

Friday Jan 30, 2015

In an Oracle press release, it was revealed that more than 600 customers have selected Oracle’s rich, integrated suite of EPM and ERP cloud services to drive growth and innovation.

On January 30, 2015, Oracle announced that in the second quarter of its fiscal year 2015, sales for Oracle Enterprise Performance Management Cloud (Oracle EPM Cloud) increased by 80 percent, and 250 new Oracle ERP Cloud and Oracle EPM Cloud customers were added during the quarter. This growth reiterates customers’ confidence that Oracle is best positioned to offer CFOs a complete, integrated suite of financial management and enterprise performance management cloud services, all designed to work seamlessly and securely together.

“Our financial information has become transparent subsequent to our 2013 initial public offering,” notes Karri Callahan, acting chief financial officer and corporate controller, RE/MAX. “To support our ambitious growth strategy, we needed a more efficient finance system with embedded controls and extensive reporting capabilities. Oracle offered us pre-integrated, state-of-the-art cloud services. This was a compelling value, since we prefer to invest in technology innovations for our brokers and agents rather than maintaining separate systems.”

“Oracle Planning and Budgeting Cloud Service will enable us to significantly reduce the time and effort needed to perform our daily P&L forecasting process, which is our most critical business management practice,” said Paul Cardell, vice president, Corporate Operations, CTDI. “In addition, the real-time analytical data and comprehensive reporting that we can generate from Oracle Planning and Budgeting Cloud Service will enable us to make timely and well-informed decisions in order to run our business better”

To view the entire press release, click here.To read more about Enterprise Performance Management in the Cloud, click here.

B/E Aerospace is the worldwide leading manufacturer of aircraft passenger cabin interior products for commercial and business jet aircraft. The company, which was growing rapidly through a series of acquisitions, decided to adopt Oracle Enterprise Performance Management solutions to drive innovation and organizational change.

They took a three phased approach:

*PHASE I – Prove the value of the Hyperion solutions to senior management by leveraging the applications to meet company goals*PHASE II – Build a superior financial end-to-end solution for monthly, quarterly, and annual reporting*PHASE III – Build scalable daily financial reporting & analysis applications in order to make better decisions faster

In just nine months, the company completed a full-scale implementation that was delivered on time and under budget. As a result, B/E Aerospace has reduced by 80 percent the amount of time it takes to mine data from more than 30 sources. And the business can also acquire new companies and integrate their financials in three to four weeks instead of six months—dramatically speeding assimilation and supporting their acquisition strategy.

Friday Sep 12, 2014

Oracle OpenWorld 2014 is about to roll out the red carpets on September 28th when we take over the city of San Francisco for five days. Business Analytics has a fantastic showing this year with over 130 EPM, BI, Analytics and Big Data sessions delivered by Oracle, our customers and partners. We’ll also have 7 Hands-On Labs, 28+ demo pods dedicated to Business Analytics products, and 30+ partners exhibiting their solutions.

So what’s hot in the Business Analytics program at OpenWorld? Here are some of the “must see” sessions at this year’s conference:

Monday, September 29th, be sure to catch the Oracle Business Analytics Executive Briefing led by SVP of Product Development, Balaji Yelamanchili. Find out what’s new and where we are heading with EPM, BI, Big Data and Analytics. Balaji is also leading Oracle’s Big Data Strategy—Unified Data Management and Analytics on Wednesday, October 1st, presenting all the exciting and innovative capabilities available today and coming soon.

For a deeper dive into Big Data, on Monday, September 29, Neil Mendelson and Paul Sonderegger will lead Oracle Big Data: Strategy and Roadmap to get us up to speed on the rapid advances in big data. Also, Chris Lynskey, Ryan Stark, and Omri Traub of Oracle will lead the presentation New Innovations in Big Data Analytics the same day.

What’s new in BI and Cloud? Judging by the lineup of presentations available – PLENTY. Don’t miss Matt Bedin, Alan Lee, and Raghuram Venkatasubramanian of Oracle present Oracle BI Cloud Service Overview and Roadmap on Monday, September 29, and catch Jack Berkowitz as he presents What’s Next for Oracle Business Intelligence Applications? A Sneak Peek at the Roadmap on Tuesday, September 30th.

The EPM and Cloud presentation lineup is also impressive. Watch for the General Session: Executive Briefing on Oracle’s EPM Strategy and Roadmap by Balaji Yelamanchili on Monday, September 29th to find out what’s going on and what’s coming soon. If you have more questions, be sure to attend the Product Development Panel Q&A: Oracle Hyperion EPM Applications and get them answered by our experts on Wednesday, October 1st.

To learn more about Oracle Planning and Budgeting Cloud Service, join the panel of customers including CTDI, Vertex Business Services, and Manhattan Beachwear for the presentation Customer Success: Oracle Planning and Budgeting Cloud Service on Wednesday, October 1 where they will highlight some amazing and recent implementations, and answer questions.

To meet the big Business Analytics/EPM innovation award winners this year, be sure to attend the session Oracle Fusion Middleware: Meet This Year’s Most Impressive Innovatorshonoring organizations from around the globe that are using Oracle products to achieve significant business value.

For more details on these and many other Business Analytics sessions at OpenWorld, access the “Focus On” Business Analytics program guide link.

Wednesday Jul 09, 2014

Being able to allocate costs with high visibility throughout a large, global, multi-disciplined bank may seem impossible, but that’s precisely what Qubix did very successfully. I had the great fortune to interview Roger Cressey, a Group Director and founder of Qubix - and find out how he and his team were able to automate, standardize, and make visible, complex cost allocations throughout the bank.

Qubix is a Platinum partner of Oracle’s, with offices in the US, UK, Australia, Dubai and, most recently, Japan. They deliver Oracle Enterprise Performance Management and Business Intelligence solutions to quite a range of customers, including those in film, airlines, banks, insurance houses, consumer products; pretty much anyone that has horrible numbers to crunch.

In this interview, Roger talked about a large, global, multi-disciplined bank that they had been helping with various challenges for about three years. Originally, Roger was introduced to the Bank through an acquaintance that had become an employee of the bank, and then wanted to upgrade the bank from Essbase version 5 to release 11.1.2.1. Qubix was able to perform the upgrade in just three days and had time to build an additional prototype Essbase model to enhance their ability to collate financial data, and then distribute their information from a single “version of the truth”.

“We helped the Bank build monthly and daily Essbase models, and as the platform grew, they could now see data that they had not seen before!” said Roger. The Bank used to do a lot of analysis in spreadsheets, very LARGE spreadsheets – but could now do it more efficiently in Essbase. Allocations were still a challenge as they were still trying to do large, complex allocations in spreadsheets. One of the Qubix team found out what they were trying to do and introduced them to Oracle Hyperion Profitability and Cost Management (HPCM). HPCM is an application which leverages Essbase as a very powerful calculation tool, with an extremely user-centric front end. Non-technical users can create allocation calculations and methods. One of the strongest features of the product is the ability to trace allocations.After a demonstration, the Bank was very enthusiastic to implement HPCM and had Qubix create a proof of concept for one of the divisions very quickly.

So, what were the Bank’s key challenges? According to Roger, they included:•A manual cost allocation process – error prone•Had to re-verify numbers because often the data available to the different entities was inconsistent, largely due to timing / information availability.•Difficult to show where the numbers were derived from, or how they had been allocated (black box to the members of the Bank)•Multiple errors in their huge spreadsheets (due to human error, formula maintenance, etc)•Their review process was very difficult and time consuming – if they wanted to use a different driver to reallocate costs or revenues – or if they added new entities, they had to change these massive spreadsheets and hope to catch all the changes. •No single source of cost allocation data

Rollout to all the divisions of the bank was done in an interesting way. Roger explained that it was implemented with a rolling prototype built in partnership with the Bank. This meant that in the end, the Bank gained the expertise and owned the solution themselves rather than relying heavily on Qubix. “Rather than trying to automate the massive spreadsheets broken down across the divisions, we rolled out the Essbase and Hyperion Profitability and Cost Management solutions to the different divisions,” said Roger. The initial HPCM rollout across the world took approximately nine months and the Bank have additional plans to do even more.What kind of benefits is the Bank experiencing? According to Roger, plenty! They include:•Largely automated allocations•Feeds directly from source systems, so there is very little room for error •Data is consistently sourced from the same Essbase sources •Bank now knows how the costs are broken down at a very granular level, and (most importantly) quickly•Accuracy is improved because it is from one source•When making changes – such as a driver or allocation algorithm - it is a matter of minutes to make a change rather than days of work•Now have standardized calculation and allocation methodologies, and a clear data dictionary •“Recipients” of allocated costs can now see for themselves where costs have come from and how they were allocated. This has reduced the amount of time spent in cyclical reviews

As for lessons learned, Roger had some interesting ideas here too. “Process is very important,” he said. “Develop a long term relationship with your partner. A good partner will give you good advice – they should be able to say ‘no’ to a bad idea and not just say ‘yes’ to anything you ask them to do”. In addition, Roger suggested that when you go forward with an implementation, get internal ownership of the project and the solution. Get it and maintain it. The consultant should not own your solution, but you can and should ask for help for unusual circumstances (someone leaves your company and takes the expertise with them, new things you want to do, etc.). Lastly, Roger felt strongly that there is not enough education and training around Enterprise Performance Management solutions. What is his idea to resolve this dilemma? “When someone is inducted into the company, they should learn where to park their car, health and safety procedures, and then how to use Hyperion solutions.”

To listen to the entire podcast, click here.To learn more about Oracle Hyperion Profitability and Cost Management, click here.

Tuesday May 27, 2014

Does your company spend too much time on Operational Transfer Pricing? Is the process efficient and transparent? Or is too much time spent in low-value activity like gathering data and manipulating it in spreadsheets. If you are like most companies, the transfer pricing process has a lot of room for improvement. With the ever increasing scrutiny on corporate taxation, many companies are looking to improve the transfer process to ensure it has all the proper controls and efficiency necessary for today’s multinational companies.

Marc Seewald, Senior Director of Product Management for EPM Applications specializing in the tax domain and Product Manager for Oracle Hyperion Tax Provisioning, and Bart Stoehr, Senior Director of Product Strategy for Oracle Hyperion Profitability and Cost Management joined me for a discussion/podcast on this interesting subject.

So what exactly is “Operational transfer pricing”? Marc defined it this way. “Transfer pricing is a profit allocation methodology required to be used by multinational corporations. Specifically, the ultimate goal of transfer pricing is to ensure that intercompany allocations result in true economic profitability by legal entity. According to Marc, in today’s global economy, profitability can be significantly impacted by goods and services exchanged between the related divisions within a single multinational company.

Today, most companies manage the operational transfer pricing in a very manual process – typically relying heavily on Excel or custom-built solutions such as MS Access. A significant amount of time is spent on collecting, manipulating, and aggregating data. However, the collection of the data to support the intercompany allocations is only half of the battle. Once the data has been properly collected, companies then need to apply transfer pricing assumptions. This, too, likely takes place in Excel. Many companies spend weeks, or even months, preparing for a single transfer pricing calculation.

The effort associated with a manual transfer pricing process is not the only problem. Excel-based processes often lack the proper controls and transparency necessary for such material financial reporting activity. This can result in material mistakes during the reporting process. Additionally, the lack of transparency can cause headaches later on during audits.

What are the repercussions of improper operational transfer pricing? How important is it? Because of its potential impact on taxes paid by a company, revenue agencies like the IRS, and international regulatory bodies like the Organization for Economic Cooperation and Development (OECD) are pushing to reform and clarify reporting for tax transfer pricing. Most recently the OECD announced an “Action Plan for Base Erosion and Profit Shifting”. As Marc explained, the times are changing and companies need to be responsive to this issue. It’s imperative that companies have a clear and auditable operational transfer pricing process that enables them to clearly document intercompany profitability and avoid steep penalties and bad publicity.

Transparency and efficiency are what is needed when it comes to the operational transfer pricing process. Bart explained that transfer pricing is driving a deeper inspection of profit recognition specifically focused on the tax element of profit. However, allocations needed to support tax profitability are nearly identical in process to allocations taking place in other parts of the finance organization. For example, the methods and processes necessary to arrive at tax profitability by legal entity are no different than those used to arrive at fully loaded profitability for a product line. In fact, there is a great opportunity for alignment across these two different functions.

So it seems that operational transfer pricing should be reflected in profitability in general. Bart agreed and told us more about some of the critical sub-processes within the Oracle solution for operational transfer pricing. “First, there is a ton of data preparation, enrichment and pre-allocation data analysis that is managed in the Oracle Hyperion solution. This serves as the “data staging” to the next, critical sub-processes. From here, we leverage the Oracle EPM platform’s ability to re-use dimensions and legal entity driver data and financial data with Oracle Hyperion Profitability and Cost Management (HPCM). Within HPCM, we manage the driver data, define the legal entity to legal entity allocation rules (like cost plus), and have the option to test out multiple, simultaneous operational transfer pricing what-if scenarios. Once processed, a tax expert can evaluate the effectiveness of any one scenario result versus another via a variance analysis configured with HPCM’s pre-packaged reporting capability known as Oracle Hyperion SmartView for Office.”

Further, Bart explained that the ability to visibly demonstrate how a cost or revenue has been allocated is really helpful and auditable. “HPCM’s Traceability Maps are that visual representation of all allocation flows that have been executed and is the operational transfer analyst’s best friend in maintaining clear documentation for operational transfer pricing audits. Simply click and drill as you inspect the chain of allocation definitions and results. Once final, the post-allocated tax data can be compared to the GL to create invoices and journal entries for posting to your GL system of choice. Of course, there is a framework for overall governance of the journal entries, allocation percentages, and reporting to include necessary approvals.”

Lastly, Marc explained that the key value in using HPCM for operational transfer pricing is that it keeps everything in alignment in one single place. Specifically, Oracle Hyperion effectively becomes the single book of record for the GAAP, management, and the tax set of books. There are many benefits to having one source of the truth. These include EFFICIENCY, CONTROLS and TRANSPARENCY.

So, is there room for improvement? Why not automate the operational transfer pricing process!

To listen to the entire podcast, click here.To learn more about Oracle Hyperion Profitability and Cost Management (HPCM), click here.

Tuesday Apr 29, 2014

Technology is changing the way we do business, and where we do business. The introduction of interactive, visual-style, on-the-go or mobile analytics is certainly helping busy people get what they need when they need it. I had the pleasure of interviewing Mitch Campbell, a Senior Principle in Oracle’s global Business Analytics Product Group on this topic. In this Oracle Thought Leadership podcast, he shared some amazing information about how business analytics has not only become mobile, but more interactive and visual as well.

Mitch impressed upon our audience that the emphasis on visualization is stronger now than it ever has been. Mitch explained, “Traditional BI and EPM companies have had to adapt to new types of users, new levels of complexity, and new requests for integration to systems that never have been integrated before to get a full management reporting view of things. There have also been many small companies arrive onto the scene pushing desktop visualization, and finding their niche. I don’t look at them as an analytic threat to Oracle, in fact, we have learned a lot from what they offer and the response they get in the marketplace and have applied it to our new product capabilities. We have improved what we do significantly when we consider our approach to analytics and delivering easy self service applications for all sizes of user communities, with new options, new visualizations, and fast creation of content”.

Consumers of Business Analytics are becoming a lot more sophisticated, and Oracle has evolved analytics to keep up with that sophistication by providing tools to help the user build whatever they need whenever they need it. “Oracle is known for products that work for an enterprise, and the analytic focus has always been there,” said Mitch, “but now, we see the need for departments and individuals to be more self service, more in need of interactive analytics. In turn we have changed our business process to a more balanced approach in R&D to meet the needs of the broader user community. I like to say that Oracle can meet the needs of the enterprise, the department, and the individual.

But how can business users continue to analyze and make decisions on-the-go? Mitch explained that the trend towards mobile platforms is one of the main drivers in EPM and BI, and is a perfect example of how Oracle has changed its business process. Oracle develops and releases software for different mobile devices, and that development is considerably quicker than for traditional devices like laptops or PCs. Typically, 6-8 weeks instead of months/years. Mitch elaborated, telling us that mobile users have come to expect this development pace, and they expect simple to use interfaces, fast performance, and great visualizations. Oracle typically adds new features, charts and visualization capabilities in each rapid release to meet user expectations – which is much faster than they have done in the past.

Who might use mobile interactive business analytics? In short, many people. Mitch gave our audience a great example - many companies are posting investor relations information on their websites, mainly in the form of static annual and quarterly reports. Further, the reporting available is typically Income Statements, Balance Sheets, and Cash flow reports. Public sector cities like Boston and New York are posting performance metrics on their website, and giving access to everyone. Mitch posed the question, “What if corporations start looking to meet the new expectations of today’s users and begin providing analytics in some new forms? What if instead of static 10Ks and 10Qs, companies provide easy visualization and interactive analytics?” Mobile access to this information would mean access for phones and tablets too. We both agreed that this new access for investors should be free and easy to navigate so there are no barriers for investors to access or download it.

What might investors expect to see? Mitch suggested that the investor experience would be much more like an interactive application with tabs and visualizations that quickly paint a picture for performance. “We could include things that take a standard report to the next level, like visually explaining the annual report.” For example, make the report “drillable”. Show revenues broken into different categories. Or perhaps take footnote disclosures and visually show them in business categories. This type of reporting does a much better job of showing the focus of a company. “With this interactive analysis, we can also include commentary, trends, and even some directional forecasting that give insight into strategy,” said Mitch. It would be possible to show 10 year revenue growth, year over year analysis, and the ability to allow some controls to – say – “take out a bad quarter”. This would enable investors to see growth trends, when all but one quarter is good, and companies would be able to explain it much better with a visualization to show what is typical for them.

Thursday Mar 27, 2014

In this age of customer-centricity, do you really know how to put a value on your customers? I had the pleasure of interviewing Gary Cokins, the founder of Analytics-Based Performance Management - an advisory firm in Raleigh North Carolina - for a Thought Leadership podcast on this topic. We discussed Customer Lifetime Value and how to view customers – not only as profitable or unprofitable to a business – but similar to investments for a business like in an equity stock portfolio. The objective from a shareholder’s view is increase the return on investment from the customers. Gary has written a dozen books on Enterprise Performance Management, Activity-Based Costing, Quality Management and more.

Many of you likely already have a firm grasp on the concepts of measuring and reporting profitability, but may be less familiar the concept of Customer Lifetime Value. Gary defined it for us this way: “Customers and consumers pass through life cycle stages. For example, teenage girls become young adults, then mothers, and so on. At each stage, their consumer needs change. Each type of consumer’s future profit potential needs to be understood based on which stage in their life-cycle they are. The marketing and sales functions have begun exploring what is basically a math equation that calculates Customer Lifetime Value in monetary terms. The equation is intended to measure the future potential level of profitability of a customer or consumer to a supplier.” In essence, Customer Lifetime Value is a forward-looking view of shareholder wealth creation possibilities.

So how are these calculations different from customer profitability calculations, such as from last month or last year? Gary explained that most profitability measures are historical and do not consider the products’ and customers’ prospective profit contribution. Customer Lifetime Value math is trickier, because it also considers the probability of losing some customers (or churn). In addition, the calculation of future streams of revenue and their associated costs, which would include the net present value of discounted cash flows, are taken into consideration. This involves time value of money principles and math that considers both the timing of future cash inflows and outflows, as well as the weighted average cost of capital. A lot to think about when considering Customer Lifetime Value!

Customer classifications come into play as well. Some customers are high maintenance types with substantial demands on a supplier and some are low maintenance - often referred to as demon customers and angel customers., The substantial costs-to-serve incurred below the product gross profit margin line (i.e., channel, marketing, sales, and customer service costs) for high maintenance customers obviously erodes profits. But Gary explained that understanding the amount of the cost-to-serve for each customer is very important. A shift is needed from being product-centric to customer-centric. Suppliers need to understand the unique preferences of and differentiated services for each customer, as well as different distribution channel expenses to service their existing customers, and desirable, prospective customers to acquire.

So how does this affect spend by the suppliers? According to Gary, the key is to spend “the next dollar” on consumers who will most likely generate a relatively higher incremental increase in sales relative to the incremental expense to “lift” those sales. And this analysis should focus only on the impact of interventions with consumers independent of how the consumer might increase their volume of purchases from a supplier simply due to their progression through their life cycle.

I highly recommend listening to the entire podcast as we covered a lot more content in the interview. But the long and short of it is that suppliers must consider Customer Lifetime Value when understanding profitability to get a complete picture and determine which best actions to retain and grow profits from consumers. They must view customers as an investment – the financial return on customer – and not just a short term gain.

Tuesday Mar 18, 2014

The finance function as we know is seeing big change. We’ve been talking about this transition here at Oracle for quite awhile. Last year in a survey Oracle conducted with Accenture we explored how the role of the CFO has evolved from financial overseer to corporate strategist and change agent. The results from that study illustrated that this transition is not only happening, but it’s happening very quickly.

We’ve entered into the era of Modern Finance. Not only are CFOs depended on to drive the finance function forward, but increasingly they also play a vital part in all strategic business decisions In fact, it’s fair to say that today’s CFO lives in a completely different environment than five years ago. Put simply, CFOs live in a pressure cooker environment.

With the pressure to help identify new opportunities, products and services that will deliver growth and generate revenue, the modern CFO is undoubtedly presented with challenges and must leverage existing and new assets to deliver on the new mandate to provide strategic guidance and insight to the business.

How can CFOs meet these challenges and stay ahead of their competition? One thing that comes to mind is technology.

Technology enables CFOs to drive change and innovation. Mobile, cloud, social and analytics are just a few types of technology that are completely revolutionizing the way organizations function. Implement these technologies and organizations can gain a significant competitive advantage.

CFOs are beginning to understand this and how technology can drive change within their organization that positively impacts revenue. For example, take the cloud. The cloud is reshaping finance best practices around buying decisions as organizations duke out the ROI of cloud versus on-premise. Cloud technologies save on overhead costs with less infrastructure, timely updates, and more productive employees.

Modern Finance will be empowered through technology and CFOs are taking note.

For more information about the changing role of the CFO and best practices for keeping pace with the ever-changing landscape, visit Oracle CFO Central at www.oracle.com/cfo.

Wednesday Feb 26, 2014

“90% of companies fail to execute on strategy effectively.” This statement was made over 30 years ago – but has nothing changed? Jennifer Toomey, Senior Product Marketing Director for Performance Management Applications at Oracle interviewed Denis Desroches, Director of Research for the Institute of Management Accountants (IMA), about this subject and got an update about current experiences on organizations’ ability to execute on strategy.

Denis is part of a volunteer research team called the Business Research and Analysis Group (BRAG) that, over the past 15 years, has done world-wide studies on a number of current business practices, including the adoption and use of performance scorecards, and issues in costing and profitability. The team’s results have been published in various magazines and journals and in a book called “Scorecard Best Practices; Design, Implementation and Evaluation.” In addition to Denis, Dr. Raef Lawson, Vice President of Research and Professor-in-Residence for IMA, and yours truly – Toby Hatch - a Senior Product Marketing Director for Oracle Business Analytics, are also part of the research team.

According to Denis, the team chose to research the topic of executing effectively on strategy because during the 15 years of conducting research together, they continued to hear the same statement repeated again and again, in a number of settings, and therefore began to question its current legitimacy. The quote, “90% of organizations fail to execute on strategy effectively,” originates from an article by Walter Kiechel III in 1982 article titled “Corporate Strategists Under Fire”. This number became a catalyst for businesses to seek improved methods for defining, articulating and, ultimately, executing strategy. This fact - less than 10% of organizations can fully implement their strategies - has been repeated, relatively unchanged, over the last 30 years.

In our interview, Jennifer asked Denis what the BRAG team found out through their recent research activity. “Things do appear to be getting better,” said Denis. “Results of our on-line survey show that in 2012, a higher percentage of organizations were successful at executing their strategy”. In fact, about 40% of the survey respondents self declared that they were successful or very successful. “We did not define what constituted success; we let our respondents self-declare their own success level.” said Denis. Demographic characteristics like industry and company size didn’t appear to be predictive on which organizations would declare success or non-success.

“So what distinguishes successful organizations?” inquired Jennifer.

There are some cultural or organizational characteristics that appear to contribute to successful execution of strategy, and some technical issues and processes that need to be considered, Denis explained. For example, organizations who feel that they are very successful at executing strategy are more likely to have:

•A supportive culture, •Effective leadership, •Clear communication to everyone about what the organization is trying to accomplish, •Clear links among strategy, •Focus on organizational strengths, •And align the initiatives to get it all done

Denis also offered several technical aspects of successfully executing on strategy that should be considered (hear more by listening to the complete podcast).

Although there are still a large number of companies failing to execute effectively on strategy, the number that are executing effectively is improving, and the checklist of items to consider for improving execution is fairly comprehensive. To read more about the results of this study, refer to the article called, “Are 90% of Companies Still Failing to Execute on Strategy?” in the March/April 2014 edition of the Journal of Corporate Accounting and Finance published by John Wiley and Sons.

Friday Feb 21, 2014

Earlier this week, Oracle announced the general availability of our first EPM application in the Oracle Public Cloud, Oracle Planning and Budgeting Cloud Service, thereby extending our existing portfolio of on-premises and managed /hosted applications with a SaaS offering.

I had the pleasure of speaking and demo’ing our solution to a group of customers that day at an event in Dallas, and there was clear enthusiasm about the ability to access world-class planning functionality in a SaaS-based model. Our announcement also generated excitement in social media and news articles. In addition, existing Oracle EPM partners, as well as partners who have worked with us in other product areas, are lining up and are in the process of becoming specialized for Oracle Planning and Budgeting Cloud Service. Some have already launched their rapid start offerings.

So, why are customers and partners excited about Oracle Planning and Budgeting Cloud Service? What’s new and differentiated about this offering?

Fast Adoption

This application is built for SaaS adoption to meet cloud user expectations around ease of use and self-service. It includes a number of cloud-specific capabilities that make it easy to roll out planning and forecasting to your lines of business across the enterprise. These include:

+ Extensive online help and video tutorials+ Best practice design templates and guides that are based on years of experience with Hyperion Planning implementations+ Guided application navigation features that literally take a new user through the whole process of building an application+ Plus diagnostics and governors that assist with building and monitoring an application from the administrative side

During the 3-month customer and partner preview program that we ran last year, we received very positive feedback about how users could get up and running with virtually zero training needed.

First-in-Class Functionality

While Oracle Planning and Budgeting Cloud Service is a new product, it leverages the code base of the market-leading Hyperion Planning application, which has seen rapid adoption over the past 10 years, with close to 4K organizations implementing it. Many of these deployments have become quite large with over 1000, and some even over 5000 users globally. This is what sets Oracle apart in the marketplace -- proven on-premises technology, now optimized for the cloud.

Many companies today are assessing cloud options in parallel with traditional implementations of on-premises solutions. They are concerned about potentially locking themselves into a single approach from vendors that can only offer either a cloud solution or an on-premises solution with no way back.

For most organizations today, flexibility of deployment holds the key to the way forward. That is, the ability to adopt mixed mode deployments (public, private and hybrid clouds) as desired and to alter the mix when business circumstances dictate it. Moreover, the Oracle Cloud offers security and encryption at every layer of the tech stack, utilizing the latest physical and logical data security and protection solutions. Oracle is the only vendor who can deliver this, leveraging our own hardware, database, and applications technology, plus the Oracle Cloud infrastructure.

Customers I’ve spoken with welcome this flexibility of deployment and see the Oracle Planning and Budgeting Cloud Service as an additional option to meet their planning and forecasting needs. Customers have the ability to move applications back and forth between Planning and Budgeting Cloud Service and Hyperion Planning on premises, through Lifecycle Management (LCM) packages, which is proven technology from the Hyperion applications portfolio.

And, unlike niche cloud vendors, Oracle lets you decide when upgrades happen, so you don’t have to go through planned downtimes at a critical time. With Oracle’s flexible upgrade schedule, you can choose an upgrade window that best fits your business. Customers also have the ability to specify the 1-hour slot for daily maintenance and backups performed by Oracle.

So what’s all the buzz about? Simply put, Oracle Planning and Budgeting Cloud Service offers world-class functionality with the simplicity of the cloud.

For more information about the Oracle Planning and Budgeting Cloud Service click here.

Wednesday Feb 12, 2014

Do you have strategic profit and loss statements for your customers, stores, and stock keeping units (SKUs) or products? Having little experience with this type of statement before, I was very fortunate to have two experts join me for a discussion about how strategic profit and loss statements can make a significant bottom line impact for Retail companies. Mark Wright, Principal Sales Consultant for Oracle EPM Applications and Bart Stoehr, Senior Director of Product Strategy Development, both specialize in the Oracle Hyperion Profitability and Cost Management Product. Both have an amazing depth of experience to share on all matters pertaining to profitability and cost management practices.

To start, I asked Mark to describe shortcomings he has seen in Retail company management practices. Mark explained that for decades retailers have been tasked to improve shareholder value by making decisions based on statutory financial statements and rarely do these mandated statements represent strategic views that embody the business. Marketing, sales and operations often have to recreate their financials to better serve their decision needs. Mark offered that “financial” profit and loss statements are generated from ERP systems designed to meet statutory reporting requirements, not the needs of strategic executives. Transactions are recorded in accounting structures by division, department and account with little linkage to profit dimensions such as customer, product, and vendor. When a customer pays for a product, key hidden expenses such as labor, warehouse, transportation, vendor, etc., are recorded in unrelated and separate accounting formats. This lack of linkage and transparency can lead to incomplete, inefficient and sometimes bad decisions.

Mark told us about a company that he had worked with that completely changed their product strategic direction by switching from product and SKU gross margin management to strategic profit and loss statements. This change resulted in driving .5% to 2.5 % profit points to the bottom line!

Diving deeper into this subject area, Mark relayed that marketing executives want to know where to make money so they can plan advertising budgets. Sales organizations focus more on who is buying so they can set sales targets and quotas. Operational managers focus on what and how so they can balance supply to demand. Merchandisers focus on store floors and aisles so they can plan. Corporate level executives just want to know when so they can set profit expectations. Everyone wants different views of profitability.

Mark offered a good example of how a mistake can be made from too little information. Merchandisers want to turn over high volume products but likely don’t understand the hidden costs associated with them such as import fees and distribution costs. Sales may want to push high revenue products to high volume customers even though the customer may be unprofitable because they tend to buy massive loss-leading products. These are very conflicting agendas and objectives and will not lead to profitability.

Bart provided good insight as to how Hyperion Profitability and Cost Management can transform traditional profitability information into strategic profit and loss reporting, giving execs and others the information they need to make good decisions. “Imagine an executive in your company pulling up a dashboard that has four different points of view into the same profit number”, Bart said. Views such as customer, product, channel (i.e. store), and warehouse all tying to the same bottom line with each view showing a color coded profit graph with the most and least profitable members. Continuing the story, the executive then clicks on the negative portion of the product graph and it displays an independent strategic profit and loss statement showing revenue, discounts, rebates, vendor costs, warehouse costs, transportation costs, store activity costs, cogs and negative income - all fully loaded with transparency and linkage to profit drivers such as quantity, activities, allocations, and other inter-dependencies.

That sounded like utopia for executives, but Bart kept going…Now imagine further drilling into the strategic profit and loss report and getting details on the store, SKU, vendor, customer, sales person, zip code, store isle and other profit measures important to decision making. I was hooked!

Bart told our listeners that this is just the tip of the iceberg. This type of tool can also address:

Friday Jan 31, 2014

Oracle’s Planning and Budgeting Cloud Service is a new cloud service based on the functionality of the latest release of Oracle Hyperion Planning, which is the global market-leading packaged application for Planning and Forecasting. Recently, I had the pleasure of interviewing Jennifer Toomey, a Senior Director of Product Marketing for Business Analytics at Oracle, on a podcast, and she relayed a lot of useful information to our listeners about the types of companies that are turning to the cloud for budgeting and planning, and the kinds of benefits they can experience. But first things first. I asked Jennifer to explain to our listeners why companies are moving to the cloud -- what are some of the challenges with planning, budgeting and forecasting that can be addressed with a cloud-based solution? She relayed to our listeners that planning extends far beyond the walls of the finance organization. “Pretty much every department in your company is involved with planning and budgeting.” The vast majority of planning and budgeting work is done outside of the Finance, Planning and Administration group by line of business users. Jennifer further explained that while common wisdom suggests that more inputs can help lead to more accurate forecasts, the problem is often that these inputs are done via disconnected processes – often using spreadsheets. There is a huge amount of inefficiency and a general loss of productivity in the planning process done this way. According to industry studies, on average:•20% of employees are involved for at least three weeks to create the annual plan•This can add up to 3% of a company’s revenue, or•$1,000 per employee!

So how can Cloud help? Jennifer explained that using a cloud-based model, a planning solution can be quickly and flexibly rolled out across the organization, enabling you to easily gain the input and intelligence of line of business managers as part of the planning process. Moreover, up until a couple of years ago, we still saw reluctance in the Finance department around adopting cloud applications, largely driven by security and data confidentiality concerns. However, this reluctance is vanishing rapidly. Analyst studies indicate that Finance executives are increasingly buying into the SaaS model, and in a recent survey that we conducted, three quarters of respondents indicated that they are currently using or will consider deploying EPM in the cloud. So what is happening with Oracle’s Planning and Budgeting Cloud Service? Jennifer explained to our listeners that “Oracle’s been moving aggressively towards the SaaS model across its application suite and, as we’ve seen our customers’ attitudes shift in favor of cloud, we are now moving our EPM applications into the Oracle Cloud.” She also described some of the functionality being offered:•It is based on the functionality of the latest release of Hyperion Planning, which is the market-leading packaged application for Planning and Forecasting, and it is optimized for the cloud.•Ability to migrate from on-premise•Data integration•Financial and management reporting•Full MS Office Integration•Same security, operations and infrastructure as all applications that are part of Oracle CloudIt is important to note that this is not simply a hosted version of Hyperion Planning, but rather, it is a new application that has been completely optimized for the cloud. We chatted about some of these cloud-specific enhancements to accelerate usage and minimize administration, including online help, guided tutorials, and diagnostic tools.What are the key benefits for customers with this cloud offering and who can benefit? Jennifer explained to our listeners that mid-size companies have a lot to gain, especially if they don’t have the resources to implement an on-premises solution. Hyperion customers with a custom-based Planning application in Essbase also have the opportunity to modernize and have a fully workflow-enabled application. But really any customer looking to quickly roll out a departmental or line of business-based planning solution, outside of finance would benefit greatly. They can all expect:•Fast Adoption•First-in-Class Functionality•Flexible Adoption (it is exactly the same software whether in the cloud or on-premises– so organizations can change the deployment method in the future with minimum effort if they need to) In summary, Oracle Planning and Budgeting Cloud Service offers world-class functionality with the simplicity of the cloud.To listen to the entire podcast, click here.To learn more about Oracle’s Planning and Budgeting Cloud Service, click here.

Wednesday Jan 22, 2014

Oscar Pardo, a Solutions Consultant for Oracle, works with Federal, State and Local governments helping them to herd their wild KPIs and establish scorecards to meet US requirements from the President. I had the pleasure of interviewing Oscar during a podcast and he gave some sage advice on what to expect when building scorecards. He described how Oracle Scorecard and Strategy Management is just the Sheriff you need to help tame your runaway KPIs, and manage your performance.

Oscar began the interview by defining what public sector organizations are trying to accomplish with their business scorecards. Agencies like the Department of Homeland Security, the Veterans Administration, and Health and Human Services are enormous (the size of some of the largest companies in the world!) and need tools to help them understand where they are performing well, and where they are underperforming. Basically, they are trying to accomplish the same things that private sector companies are striving for. Things like:

•Transparency to their public•Insight into how well they are running and where they can take actions to improve•Accountability for their funding. With the close scrutiny of funds and cost cutting in budgets, agencies are more accountable than ever for their funding•A better grip or control of what is occurring and what actions they can act on •A way to monitor those actions and make sure they are working

Oscar also mentioned the most challenging aspects of creating scorecards were:

•Developing the right KPIs, and getting consensus. This is like walking around in the Wild West. Everyone wants KPIs for themselves – there is often little organization and few rules around choosing them or deciding how to use them. •Defining the Key Performance Indicators. This takes a lot of time and effort•Locating where the information resides. This takes the longest amount of time. Federal Agencies have a harder time of it, because they have a greater volume of data because they are larger organizations. Information resides in many different systems and is measured at different levels.

Interestingly enough, the most challenging aspects were not software related!

So what part does software play in scorecards? According to Oscar, scorecard software acts like a Sheriff would in the Wild West, upholding the laws. Without the Sheriff enforcing the laws, in this case guidelines, executives will ask for more and more KPIs – then the data collection activity, reporting, and subsequent activities will get out of hand. Here is some advice Oscar shared to help:

•Have a single champion, group, or department that is in charge of determining what makes sense to capture and what will have the greatest impact to the organization, because there is a big cost in collecting and maintaining this information. – The champion is like the town Mayor; setting the rules that the Sheriff enforces.•Develop an Office of Strategic Management (or other performance management governing department) or appoint individuals to appropriately define KPIs and objectives. They can then help the Mayor so KPIs can be implemented quickly and uniformly across the organization.•Don’t wait. Too many times I hear customers say, “Let’s wait until next year” or “After the next reorganization or administration”. With a strong governing agency that is responsible for scorecards, those excuses are no longer valid. The job of an incoming administration would actually be easier because they have visibility into the organization on Day One.

So what benefits are public sector agencies experiencing with scorecards? Is it worth their while? Oscar told us YES, it is worth their while and here’s why:

•Monitoring performance is so much simpler. The Oracle Scorecard and Strategy Management product gets you up and running quickly. You don’t have to build it, and it comes with the Oracle Business Intelligence Foundation Suite.•Scorecards and Business Intelligence naturally go together. Scorecard initiatives work well with a formal Business Intelligence / Data Warehouse in place. •Mobile scorecard capabilities. Having scorecard information available on your mobile device enables you to take this information with you and act upon it without being tied to your desk or office. •Build it with market prevalent Scorecard methodologies like Balanced Scorecard or Six Sigma. It has an easy to use interface to help agencies define goals and objectives, then facilitate the building of KPIs to track and meet these goals and objectives – all within the same tool the organization uses to do its BI reporting.•Informative visualizations like Contribution Wheels, Strategy Trees, Watch lists, Cause and Effect Maps, and Strategy Maps are available automatically.

Oscar told us that Oracle made a great decision in making Oracle Scorecard and Strategy Management part of the BI Foundation which marries technology with the scorecard methodology (the Sheriff). Add the Mayor and other constituents to work with Oracle Scorecard and Strategy Management, and you too can tame YOUR Wild West.

To listen to the entire podcast, click here.To learn more about Oracle Scorecard and Strategy Management, click here.